impact of corporate governance strength on stock market liquidity: Emphasizing criteria Amihud, transaction volume and bid-ask spread

Subject Areas : Journal of Investment Knowledge

Allah Karam Salehi ¹

1 - Allah Karam Salehi Assistant Prof. Department of Accounting, Islamic Azad University, Masjed-soleiman Branch. Masjed-soleiman , Iran.

Received: 2018-10-14 Accepted : 2019-02-24 Published : 2021-03-21

Keywords: stock market liquidity, Corporate governance strength, Amihud’s measure, Transaction volume measure, Bid-ask spread measure,

Abstract :

Researchers previous research show that the existence of appropriate corporate governance mechanisms increases the quantity and quality of information disclosed by the company and, as a result, reduces information asymmetry. Foreover, as information asymmetry decreases, market liquidity increases. Accordingly, the purpose of this study is the impact corporate governance strength on stock market liquidity in listed companies on Tehran Stock Exchange. For this purpose, a sample of 120 companies during 2011-2017 was selected by systematic elimination sampling. The research method is library and correlation. Following Al-Jaifi et al. (2017), eight corporate governance features are used to measure corporate governance power and three different indicators (including Amihud’s measure, transaction volume, and bid-ask spread) are used to measure stock liquidity. Analysis and testing of hypotheses have been done with the help of generalized least squares regression (EGLS) and with panel data approach. The results show that there is a positive and significant relationship between corporate governance strength and stock market liquidity based on triple criteria, Amihud, Share turnover ratio and bid-ask spread.

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